It’s time to sit back, relax and enjoy a little joe …
Welcome to another rousing edition of Black Coffee, your off-beat weekly round-up of what’s been going on in the world of money and personal finance.
Well… another busy week is behind us. So with that in mind, let’s get this party started!
In the absence of the gold standard, there is no way to protect income and savings from confiscation through inflation. There is no safe store of value.
– Alan Greenspan
Credits and Debits
Credit: Did you see this? The latest annual Social Security (SS) cost-of-living-adjustment (COLA) is projected to be 3.5% in 2027. This is the last official projection of the year; if it’s correct, that would boost the average retiree’s monthly check by $68, from $1940 to $2008. Wow. Try not to spend it all in one place, folks.
Debit: In other news, we noticed that commercial office loan delinquencies are now at 12%; that’s near an all-time high and, remarkably, beyond the levels seen in the aftermath of the 2008 Great Financial Crisis. Meanwhile, $64 billion of additional commercial office loans come due this year and next, with nearly $40 billion of that pile already delinquent, in default or flagged as potentially troubled. The good news is that interest rates are falling sharply, which will go a long way toward helping distressed debtors. Oh, wait…
Debit: For an example of just how distressed the commercial real estate market is, consider Chicago’s Aon Center: The 83-story skyscraper sold for $712 million in 2015. Today the building is worth nowhere near that amount, with its latest appraisal coming in at just $195 million —that’s a 73% decline since 2015. Even worse, the debt matured in July, but the owner couldn’t repay it and asked its lender for more time to sort things out. Not surprisingly, the creditor wasn’t interested. Imagine that. As for the residential market, well… the jury is still out.
Debit: Speaking of distress, last week’s failure of Nano Bank brings the total number of bank closures this year to six; compare that to only two all of last year. The primary culprit this time? The aforementioned commercial property slump that is resulting in too many non-performing loans on the banks’ books. If only Nano had focused on auto loans…
Debit: By the way, in 1999, the Dow Jones Industrial Average hit the 10,000 milestone; it’s now hovering near 51,000, which is a nominal gain of approximately 416%. That sounds fantastic, until you notice the sleight of hand: Consumer prices have risen 103% over the same period, meaning today’s Dow is only 25,500 when measured in 1999 purchasing power – resulting in a significantly lower real gain of 155% over the same timeframe, and representing a very modest annualized gain of just 5.7%. True; that’s still not bad – but it’s not going to make anyone filthy rich either.
No joke… Here is time-capsule proof of shrinkflation trickery. The candy bar on top was manufactured in 1991 and was recently found in the home of a hoarder by a cleaning crew that was assigned to get the house ready for sale. Now compare that to today’s candy bar on the bottom. (h/t: @historyinmemes)
Debit: Meanwhile, real GDP has grown about 82% and real median household income is only up 19%. At the same time, the supply of US dollars (USD) in circulation has exploded 424%. As one analyst puts it, when it comes to the Dow, home values, and our annual incomes, “Celebrating the nominal number without adjusting for the shrinking measuring stick is increasingly like celebrating that your kid grew from four feet to eight feet after you changed the definition of a foot to 6 inches.” Uh huh. Unfortunately, while you can’t fool all of the people all of the time, you can fool some of the people all of the time…
Credit: Needless to say, the declining value of the USD is affecting the change in our pockets too. In fact, a Presidential Executive Order (EO) issued last year halted US penny production because each penny costs four cents to produce – so ending penny production would save $56 million annually. But EOs can be reversed by new administrations. So the House passed a bill last week which aims to halt US penny production permanently; it would also require all cash transactions to round to the nearest nickel. The only thing stopping it now is final passage in the US Senate. And, yes, we hear some of you snickering in the back of the room. Frankly, we too don’t hold much hope of this bill getting beyond the do-nothing Senate.
Scott Adams – Dilbert
Debit: Of course, all of these problems are due to the US government spending far beyond its means since 1971, which has led to a runaway $40 trillion National Debt that doesn’t include future debt obligations such as Social Security (SS), Medicare and federal pensions. A government has a few ways to shrink a debt bigger than a year’s national income: 1) It can spend less than it collects; 2) It can grow the economy faster than the interest bill; or 3) It can force its lenders – US Treasury bond (UST) holders – to accept interest payments far lower than the rate of inflation. For those not paying attention, the US government’s only reasonable remaining choice is Option 3. Even so, it still won’t stop the eventual reckoning…
Credit: On the other hand, Zero Hedge recently pointed out that US Treasury Secretary Scott Bessent could theoretically buy back roughly $40 trillion in federal debt using cash from the Treasury General Account. Now for the punchline: For that to happen, the government would first have to revalue its gold reserves at Fort Knox, the Denver Mint and several other places. How so? Well… by devaluing the US dollar (USD) relative to the yellow metal. As for the gold price required to clear America’s $40 trillion debt, well… that comes to roughly $155,000 per ounce. Hey… we’re not sayin’. We’re just sayin’. But short of returning to the gold standard, it’s the only way out. Even so, most economists pretend that the bond market will eventually make this inherently broken fiat system well again. Insanity!
Gary Larson – The Far Side
Debit: As we wrap up, we see the 30-year UST yield is at its highest point since 2004, while the 10-year UST yield is now at its highest level since the spring of 2007. For those who need reminding, 2007 was shortly before the Great Financial Crisis began, which signaled the beginning of the end for the global debt-based fiat monetary system, and ushered in an era of unprecedented currency printing, along with artificially-suppressed interest rates. So it’s not unreasonable to believe that ill-winds are blowing yet again. This time, we’re expecting the next major crisis to be the one that finally ushers in a severe devaluation of the USD relative to the yellow metal and a jaw-dropping loss of purchasing power for USD holders – if not an entirely new monetary system altogether. Got gold?
By the Numbers
With the third quarter behind us, let’s take a look at the year-to-date performance of select asset classes through 30 September 2026:
-14.7% Silver
-8.0% US 10-Year Treasury
-3.3% Gold
2.4% GDX (Gold miners ETF)
3.6% SIL (Silver miners ETF)
5.2% Dow Jones Industrials
7.2% HOMZ (Residential housing proxy ETF)
11.5% Russell 2000
11.6% S&P 500
20.6% Nasdaq 100
Source: Google AI
Last Week’s Poll Results
What’s the smallest coin you’ll pick up from the street?
- Dime, nickel, or penny 74%
- Quarter 9%
- Paper currency or bust! 7%
- Half-dollar 6%
- Dollar 4%
More than 2400 Len Penzo dot Com readers responded to last week’s question and it turns out that 1 in 4 of you won’t pick up anything smaller than a quarter. Me too… although if the USD loses much more purchasing power, I’ll also stop bending over to pick up those random quarters!
If you have a question you’d like me to ask the readers here, send it to me at Len@LenPenzo.com and be sure to put “Question of the Week” in the subject line.
The Question of the Week
Useless News: Dominic’s Dad
“Today we’re going to relax a little and play a spelling game before we head home for the long weekend,” said Mrs. Anand, the primary schoolteacher. “Each of you will stand up, tell us your name, what your father does, spell what your father does, and then explain it to us. All right, Jack, you can go first.”
The first boy in class stood up and said, “My name’s Jack. My father is a plumber, P-L-U-M-B-E-R, and he plumbs houses and fixes lots of clogged sinks and toilets.”
Mrs. Anand smiled and said, “That’s very good, Jack! All right … Dominic, it’s your turn.”
So Dominic stood up, with his eyes looking down at the floor. He shuffled his feet for a few seconds, then he said, “My name is Dominic. My father is a pharmacist, F-A-M … F-A-R-N … F-U-R-M …”
The teacher shook her head and said, “Dominic, I want you to go home tonight and learn how to spell pharmacist.” She then pointed at the next student and said, “OK, Bobby – you’re next.”
Bobby stood up and said, “My name’s Bobby. My old man is a bookie, B-O-O-K-I-E. And if he was here, he’d give you five-to-two odds that Dominic won’t be able to spell pharmacist by tomorrow.”
(h/t: Nathan)
Squirrel Cam
Believe it or not, the squirrels know that our cameras (and by extension, the people in the house) are watching them. They will often look right into those cameras when there is no food out there, as if to say, “Hey! Where’s our lunch?” This one thought it had hit the jackpot after mistaking a rock on our porch as a giant nut. When the squirrel realized it was a rock, it went to the camera…
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More Useless News
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Letters, I Get Letters
Every week I feature the most interesting question or comment — assuming I get one, that is. And folks who are lucky enough to have the only question in the mailbag get their letter highlighted here whether it’s interesting or not! You can reach out to me at: Len@LenPenzo.com
Reader Bill had this to say after reading last week’s article highlighting 10 things that today’s middle class can no longer afford:
Social media has people foaming at the mouth to have the same or better than everyone else. I’m not in junior high school, and I don’t care what you ate for lunch.
Fair enough, Bill … then could I interest you in a few quick pics of last night’s dinner?
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Photo Credit: public domain